1. Sustained and Profitable Double-Digit Growth Michael Treacy April, 2006 Michael Treacy GEN3 Partners, Inc. 781-400-5050 mtreacy@gen3.com

2. Copyright Treacy & Company, 2006 2 Indian’s best known companies are growing spectacularly 1998199920002001200220032004 $3B $1B $2B $4B 59.8% Compound Average Revenue Growth 2005 $5B $6B Infosys Revenue History

3. Copyright Treacy & Company, 2006 3 The BSE Sensitive Index has reached record highs 65% CAGR

4. Copyright Treacy & Company, 2006 4 India’s economy has averaged 6.8% growth since 1994 and more than 8% growth most recently

5. Copyright Treacy & Company, 2006 5

6. 6 TRIPLE Indian

7. Copyright Treacy & Company, 2006 7 Can your firm grow at double-digit rates? Market Opportunity The demand isn’t there Operational Capacity We couldn’t add that much capacity Management Discipline I don’t have the management system to grow Most companies only see barriers to growth Financial Capacity We couldn’t afford the cash costs Competitor Resistance We’d start World War III

8. Copyright Treacy & Company, 2006 8 Diverse companies are achieving even stronger growth H&R Block (27.2%) Lowes (21.2%) Medtronic (17.0%) Johnson Controls (13.9%) Emerging Stars Emerging Stars Wal*Mart (15.6%) Harley Davidson (18.4%) Starbucks (25.9%) Southwest (11.3%) Growth Celebrities Growth Celebrities Mohawk (12.4%) Paychex (19.0%) Oshkosh Truck (20.6%) Biomet (13.8%) Little Known Successes Little Known Successes

9. Copyright Treacy & Company, 2006 9 How It’s Answered What Does it Take to Grow at Double-Digit Rates? Key Question Build a growth portfolio of individual initiatives How and where are we going to achieve growth? Growth Strategy Develop and deliver superior customer value Why will customers do business with us? Value Leadership Develop a growth discipline in the management team How do we achieve steady growth results? Growth Discipline

10. Copyright Treacy & Company, 2006 10 Key Findings Why should customers do business with you? Commit to superior customer value in everything you do

11. Copyright Treacy & Company, 2006 11 Results Expertise Price Hassle-Free Uniquely Better Product Why should customers do business with you? Unmatched Customer Value Products “What we sell” Service “How we do business” Costs Benefits

12. Copyright Treacy & Company, 2006 12 Operational Excellence Customer Intimacy Product Leadership “Best Total Cost”“Best Total Solution” “Best Product” Leadership and Threshold Customer Value Operational Competence Customer Responsive Product Differentiation

13. Copyright Treacy & Company, 2006 Value Leadership is built on Operating Model innovations Component Supplier Raw Material Assembly Finished Goods Distributor Dealer Traditional PC Manufacturer Assembly Dell Component Supplier Sell Direct Build to Order Integrate Suppliers

14. Copyright Treacy & Company, 2006 14 102030405060708090100110 10 20 30 40 50 60 70 80 90 100 110 Labor Productivity GDP per Capita USA (1996) India (2000) Russia (1999) Brazil (1997) Poland (1999) South Korea (1997) Japan (2000) United Kingdom (1998) France (1996) Germany (1996) Source: Economist Magazine, OECD, McKinsey

15. Copyright Treacy & Company, 2006 15 Operational Excellence Customer Intimacy Product Leadership “Best Total Cost”“Best Total Solution” “Best Product” Leadership and Threshold Customer Value Operational Competence Customer Responsive Product Differentiation

16. Copyright Treacy & Company, 2006 16 Customer Intimacy – The architecture of a total solution Basic Products & Services (the things we’re all good at doing) What every- one offers “Why we’re highly qualified” Business Problems Why do you need us as a partner? “Our point of view on how to solve customer problems” Enabling Programs (things that drive client performance) How do we drive results for you? “Our programs that creatively address root causes of your problems”

17. Copyright Treacy & Company, 2006 17 Commodity Producer Commodity Producer Marketing Asserter Marketing Asserter Features Improver Features Improver Breakthrough Driver Breakthrough Driver Fast Cycle Innovator Fast Cycle Innovator Incrementally better product Improved!! (not really) Cheap and easy Accelerating innovation Redefining the product Procter & GambleKellogg’sStore BrandNokiaGenentech Example Consumer Goods Company incrementalroutine & minornonefundamentalbreakthrough Typical level of product innovation Product/Service Innovation is Intensifying in many markets

18. Copyright Treacy & Company, 2006 18 1 10 100 1000 10,000 Number of Ideas 1 2 34567 Stage of New Product Development Process 3000 Raw Ideas (Unwritten) 300 Ideas Submitted 125 Small Projects 9 Early Stage Devel. 4 Major Devel. 1.7 Launches 1 Success Source: G. Stevens and J. Burley, “3000 Raw Ideas = 1 Commercial Success!” ResearchTechnology Management, 40(3): 16-27, May-June, 1997 Product Innovation is an inefficient and ineffective process

19. Copyright Treacy & Company, 2006 19 Key Findings Commit to superior customer value in everything you do Focus on five, and only five, sources of revenue growth

20. Copyright Treacy & Company, 2006 20 Share Gain The toughest way to grow – to win, someone else must lose Use better value to take business directly from competitors There are only five sources of revenue growth Base Retention To grow we first have to stop shrinking Exploit the advantages of incumbency Market Positioning Half of success is showing up where growth is going to happen Find the new growth segments before anyone else Adjacent Markets Attack neighboring markets But, only when immediate and practical advantage is in hand New Lines of Business Acquire in unrelated markets But, only when management has superior investment skill

21. Copyright Treacy & Company, 2006 21 Key Findings Commit to superior customer value in everything you do Focus on five, and only five, sources of revenue growth Manage a portfolio of growth opportunities

22. Copyright Treacy & Company, 2006 22 How might your business grow 20% per year? One illustration 0.0 10.0 20.0 Percentage Revenue Growth switch clients in-line acquisitions 3% 2% Share Gain internal innovations adjacent acquisitions 3% 4% Adjacent Markets retain client base 0% Base Retention new LOB acquisitions 0% New Lines Of Business transformational innovation shift to growth segments market segment acquisitions 3% 5% Market Position

23. Copyright Treacy & Company, 2006 23 Key Findings Commit to superior customer value in everything you do Focus on five, and only five, sources of revenue growth Manage a portfolio of growth opportunities Build the management discipline to grow

24. Copyright Treacy & Company, 2006 24 Culture Leadership Recruitment & Development DeploymentIncentives Are our people focused on the right measures of performance that will drive growth? Do we have our best talent in the roles where they will have the biggest impact? Do we have enough talent to “fund” our growth initiatives? Do our shared attitudes and beliefs about risk taking and collaboration support our growth ambitions? People processes are key enablers of growth

25. Copyright Treacy & Company, 2006 25 Build the management discipline to grow Talent Management –Recruiting, development, deployment, and retention built for where we’re going, not where we’ve been Innovation Management –management that allows us to identify, create, test, refine, and deliver improvements in customer value quickly and effectively Performance Management –Management control built on actionable revenue information and root cause analysis of performance shortfalls

26. Copyright Treacy & Company, 2006 26 Better information is needed to manage growth

27. Copyright Treacy & Company, 2006 27 Everyone should use a Sources of Revenue Statement

28. Copyright Treacy & Company, 2006 28 Performance complexity grows along three dimensions StructuredUnstructured Extended Enterprise Individual Small Group Enterprise Extended Team Stable Chaotic Degree of Work Complexity Scope of Organization Complexity Degree of Environmental Complexity

29. Copyright Treacy & Company, 2006 29 Performance complexity grows along three dimensions StructuredUnstructured Extended Enterprise Individual Stable Chaotic Degree of Work Complexity Scope of Organization Complexity Degree of Environmental Complexity System of Effective Adaptation System of Effective Alignment System of Effective Routine

30. Copyright Treacy & Company, 2006 30 Conclusions Growth opportunities abound The challenge of growth isn’t in the marketplace – it’s in the management team Growth demands a management discipline - just like cost control Engage the whole management team in the challenge of growth Certain principles underlie all forms of growth: –Your choice of markets shapes your fate. –New revenue only comes from customers –The best management team beats the best strategy every time

31. Sustained and Profitable Double-Digit Growth Michael Treacy January, 2006 Michael Treacy GEN3 Partners, Inc. 781-400-5050 mtreacy@gen3.com Triple